India’s central bank has proposed working with the government to introduce interest-free banking to tackle financial exclusion for religious reasons, potentially opening Islamic finance to the largest Muslim minority population in the world. The Reserve Bank of India (RBI) made the proposal in its annual report last week, as departing central bank governor Raghuram Rajan hands over the reins to close ally Urjit Patel. The RBI said it would explore introducing interest-free banking products in consultation with the government, a key detail as this opens the prospects of supportive legislation. Development of Islamic finance has been slow, however, partly because of strong opposition from bureaucrats and politicians from the ruling Bharatiya Janata Party. The government’s external lending agency, Exim Bank, said in April it would extend a $100 million credit line to the private sector arm of the Islamic Development Bank.

Source: Mint September 05, 2016 05:48 UTC